Neither major party has one, for higher ed or for anything else. Higher ed boards and presidents don't either. (Pictured at left: UC Regents Gareth Elliott, John Pérez, and Sherry Lansing.)  Rebuilding this system is pretty much up to us.

I say this because however universities' operations people struggle to hold fall term together, the larger policy response has lost its grip on the unfolding disaster.  The most vulnerable students are disproportionately dropping out, academic programs are being closed, doctoral programs are being suspended, early-career women faculty's academic futures are put in jeopardy, student enrollments have been further destabilized, and testing and tracing regimes are too uneven to assure general reopening in spring.

There's also higher ed employment. At the Chronicle of Higher Education, Dan Bauman pulled together data on the worst higher ed employment collapse since modern statistics began. Since March 2020, the sector has lost seven percent of its workforce.  Here's the gruesome chart.

The rising employment trend you see largely tracked student enrollment growing by about 25 percent in this period. When Covid hit, most universities hadn't fully recovered from the Great Recession.  Employment during that downturn merely went sideways, rather than going off a cliff.   Now it is going off a cliff.

The minds of policymakers and governing boards have been dulled by promises of a V-shaped recession. Everything is supposed to bounce back when dorms and classrooms re-open.  You can see a small bounce above.

A bounceback in employment requires both political will and money. The two are linked.  In Bauman's other chart, note where the bouncing is not happening.

In spite of all the rhetoric about access and inclusion, politicians are not allocating money to the institutions--largely public--that offer those.  Everyone is concerned about the diversity of the academic pipeline.  Collapsing higher ed employment, much in various kinds of student services, squeezes the pipeline at its most diverse point.   (Private colleges both wealthy and reputable are also suffering: Ithaca College has announced a plan to cut 25 percent of its faculty.)

Lying behind this is the negative role now adopted by state governments. They applied austerity and helped deepen the Great Recession. They are playing the same destructive role again.  Republican state governments are cutting higher ed. But Democratic state governments do the same, with New York and California in the forefront.  In spite of what you hear around UC, the Democratic legislature gave UC's general fund a 12.2 percent cut (details here).

Legislators and governors blame a Covid crash in tax receipts. States are having a terrible tax revenue year:  some expect to lose a fifth or even a third of their budgets (CBPP's State Budget Watch has an appalling chart of estimates state by state.)  But this problem is partially self-inflected. States can raise revenues by raising taxes on people and business that have wealth and income. Covid has been bad for labor and good for capital; bad for lower incomes and okay for higher.  Legislators could pass a solidarity income tax surcharge on high earners. They could pass a Facebook tax, a Google tax, an Apple tax, a Microsoft tax, and especially an Oracle tax; in New York they could pass a Goldman Sachs tax, etc. These would be taxes on the very wealthy and currently prosperous individuals and sectors these companies represent.  But today's Democrats are no more likely to pass even temporary taxes than are Republicans.

What about governing boards?  They are fiduciary authorities, and their job is to maintain the revenues that allow for the full functioning of their institutions.  In California, that means money to pay for non-commodity learning and (always) money-losing research while minimizing the debt of students emerging from a population with Deep South levels of economic inequality and the nation's number one poverty rate (corrected for cost of living), while dealing with Covid losses and added expenses. Instead of taking a $500 million cut, the regents should be pounding the table for a $1-2 billion raise.

(The same goes for senior people in public health, fire fighting, forest and other environmental remediation, disaster relief, housing and community rebuilding--all leading to using the full rainy day fund, raising taxes now to meet actual urgent needs, hiring unemployed people to do all the work of reconstruction, which would massively stimulate economic activity, tax receipts, etc.  Keynes did live and write his books, and he and his heirs are still correct. )

Given the need and the possibility, what happened at the UC Regents meeting? After the budgetary vaguenesses of their July meeting, board chair John Pérez demanded real data in September.  In September, there were if anything fewer data than in July.  UCOP presented a lesson on the 2009 furloughs.  The one bright spot was that it was interpreted to mean that furloughs aren't a magic bullet. The discussion gave the regents the chance to favor steep progressivity in the furloughs that they said they didn't want to impose, and also to oppose layoffs of frontline staff.

Fine, but there was no plan, and also very little data. For example:

There are no numbers attached to any of these very significant problems.  How bad is the total problem?  No one really asked, and UCOP folks didn't really say.  UCOP works to demobilize the regents, and vice versa, and anyone who wants to rally for the cause of proper Covid funding is cast outside the pale.

The low moment in the charade of deep uncertainty was the refusal to admit that the federal bailout is not going to happen, and getting proactive about the fact that the Democratic cut of 12.2% will start in the current year.  I noted in my last budget post that this is really at 20% cut from the regents' fairly modest request of November 2019.  But not a word about the problems this will present to campuses, faculty, staff, and students.

Rather than saying the feds won't save us, pushing the regents to demand a new deal from the state, UCOP continued to suggest the money will come. Dan Mitchell reports that in an October 6th meeting, a regental committee was told that even if they miss the October 15th deadline (a dead certainty), the state may get money later from a Biden administration and pass some on mid-year to UC.  This isn't planning but wishful thinking, and a commercial investor would dump the stock.

In one case, the slide title belied the data.

In fact, August losses increased again. Given the state's erratic Covid suppression, medical center losses may continue to increase.  The regents' asked no questions about this.  The routine is pretty well established: every regents meeting features UCSF Chancellor Sam Hawgood mechanically intoning that UCSF isn't really losing money after all--it has a "positive EBITA." Nobody asks him, given $850 million in med center revenue losses, what the hell he's talking about.  But the effect is to create enough uncertainty to dull the sense of urgency. 

Discussion of borrowing capacity has the same effect. UCOP's Nathan Brostrom noted new bond revenues of $1.5 billion over the summer, plus $10 B in available liquidity in STIP, and, in passing, identified another $5-6 billion in further borrowing capacity.  So UCOP makes the regents feel that cash flow is in very good shape.  Regent Lark Park observed at some length that the legislature has too many problems to give UC more money.  Regent Pérez said that the goal is smoothing losses so that they are spread out over several years.  Between the regents's desire to protect the legislative Democrats from the University, and their desire to avoid responsibility for layoffs, they will support further borrowing and campus cuts spread out over 2-5 years.  UCOP and the Board are locking in years of campus cuts where there is already nothing left to cut, but without ever actually saying so.

Earlier, new president Drake gave a short introductory talk that mentioned good things like rising awareness of systemic racism while never mentioning the budget.  His lack of affect and vague formulations said "caretaker president." I hope I misheard, since pressure tactics are required.

New Senate chair Mary Gauvin committed the Senate to supporting the Green New Deal project developed by UCSD faculty, and said good things about the need for greater mutual support during the pandemic.  She also said nothing about the budget-- or about the shared governance crisis.  All these good projects require money. But nobody would talk about the money.

The effect is a denial of the size of the budget problem.  In August, I detailed the possibility of a 16.6% reduction in 2020-21 revenues from January projections. What data in the September meeting refuted this? There is some good news, like resident student enrollments holding up. But UCOP offered no specific data that could dismantle a middle scenario like mine, much as I would like that to happen. 

Groups like UCOP and the Board of Regents can't fend off the worst because they won't openly plan for it, or even mention it. They can't negotiate a no-cuts budget with the legislature because they don't explain why it's necessary. Much of the damage to public universities after 2008 was self-inflicted.  We are watching the same exact internal leadership failure happening again.  Its first victims will be the lower-income employees and most vulnerable students that Democratic governing boards want to protect. 

The current board--presidential system hasn't worked well for a while. In my next post, I'll suggest a distributed governing system that would do better.

The UC Berkeley community received this email this morning. You can find coverage at Inside Higher Ed and The Chronicle of Higher Education.

From: Nicholas Dirks Chancellor

Date: Wed, Feb 10, 2016 at 8:13 AM

Subject: Launch of campus strategic planning and analysis process

To: calmessages_communication@lists.berkeley.edu

Dear Colleagues,

Today, we announce a strategic planning process designed to ensure our excellence in the face of continuing financial challenges.   This process is comprehensive, encompassing academic and administrative realignment, investment in our fundraising and revenue-generating activities, and the reexamination of all our discretionary expenditures, including athletics and capital costs.

Whether in California, Wisconsin, Michigan, or elsewhere, public research universities have been challenged not only by dwindling state support but also by shifting public opinion and momentous social and economic change.  Even without financial challenges, the pursuit of our goals would require that we continually assess the well being of our institution, while simultaneously holding true to our core values.

Now, for a variety of reasons, both internal and external, we face a substantial and growing structural deficit, one that we cannot long sustain. Because this deficit does not reflect a short-term dip in funding, but a “new normal” era of reduced state support, responding to this deficit requires that we take a long-term view. We must focus not only on the immediate challenge, but also on the deeper task of enhancing our institution’s long-term sustainability and self-reliance. This is a moment not just to stabilize our finances, but also to consider our future as a leading institution of higher education. The guide for this effort has to be our core mission: to enhance the educational experience we provide to students while maintaining our commitment to access; to increase the support we provide for ground-breaking research and scholarship; and to align our public outreach with 21st century societal needs.

Accordingly, we are embarking on a comprehensive strategic planning process, the aim of which is to reimagine the fundamental structures and processes of our university. We need to evaluate how best to structure the university so as to maintain, above all, our excellence as an institution. To be sure, ahead of us lie difficult decisions and hard work, but we are fortunate to be taking this on early enough that we have the resources and time necessary to be thoughtful and strategic.

In this effort, we are committed to broad engagement with campus constituencies. Since last June, the senior academic and administrative leadership has been in discussion with the Academic Senate and the deans, the trustees of the UC Berkeley Foundation, our new Board of Visitors, and the Office of the President (which is ready to provide significant financial assistance). Now, as we transition from analysis to comprehensive planning, we want to be sure that Berkeley’s faculty, staff, students, and alumni are well informed. Even as some of the investments we make will be greeted enthusiastically, we also know that some of the changes we will undergo will be painful. Throughout the process, however, it is crucial that everyone work together to ensure both that we make the right decisions and that we make them in the right ways.

Every aspect of Berkeley’s operations and organizational structure will be under consideration.  Our decision-making, however, will be strategic.  We are identifying areas in which new investments will both produce additional resources and enhance our strength; and we are identifying other areas in which the expenditure of resources may be less critical to our overall excellence and core mission.  Some important campus-level initiatives, such as the Berkeley Global Campus and the Undergraduate Initiative, will be entirely supported by philanthropy and external partnerships (aside from small amounts of seed funding).

While our short-term measures – some of which were outlined in our recent budget call letter – are relatively straightforward, our longer-term initiatives will be more complex. These include:

• Evaluating our workforce in relationship to our changing needs and resources. This will also entail a new mechanism for the monitoring and control of staffing levels – mirroring the discipline we have long applied to hiring of faculty. We will also review our senior administrative functions, including central units, to reduce redundancy and create new forms of collaboration. We will complete the assessment and analysis of Berkeley’s workforce and its future needs by the end of the current academic year.
• Improving support for our teaching and research while also redesigning many of our work processes in order to achieve greater efficiency. For example, to better support our faculty’s ability to compete for research grants, we have begun an end-to-end review that includes research support activities in academic units, the Sponsored Projects Office, Campus Shared Services (CSS), and Contracts and Grants Accounting.  The shortcomings in CSS, which we have already begun to address, will continue to be evaluated; we will make all necessary changes.
• Making new investments to expand our fundraising capacity along with other new areas for external support. In order to achieve the best results in this domain, we are also designing a campus-wide approach to philanthropy – one that will increase our endowment, expand our fundraising abilities, improve donor relations and reach out more effectively to supporters. 
• Achieving additional revenues through our “brand,” land, and other assets.  This initiative will ensure that we are earning maximum revenues from licensing and other financial agreements, while protecting our image and being true to our values.  It will also explore ways in which the wise use of our real estate and other assets can both yield revenues and help to address the ever-pressing housing needs of our faculty, staff, and students.
• Working with the Academic Senate leadership and the deans of the schools, colleges, and Letters & Sciences divisions on the redesign of some of our academic structures. Realignment will ensure that we are excellent in all we choose to do, in our research and in our educational mission.  In some instances, this means strengthening units as is; in others, it means narrowing the focus to specific areas of excellence; and in some instances it means combining and rearranging to capture intellectual synergies and to ensure sufficient scale academically, administratively, and financially.  Even if our financial situation were better, these changes make academic sense, ensuring that all our units have a scale, and sufficient support, to mount the strongest programs. This initiative will involve extensive consultation, consideration, and testing.
• Expanding online offerings and enrollments in University Extension, as well as professional and other master’s programs that earn revenue. In addition, over the course of the next few years, financial support for our admitted doctoral students will be improved, while some enrollments will be reduced and brought into alignment with those at peer universities in order to better support the quality of these programs.
• Re-examining the gap between Intercollegiate Athletics’ revenue and expenses, which has widened in recent years.  To reverse this, we are pursuing major opportunities to increase revenues and donor support for scholarships, while looking at ways to reduce administrative costs and other team expenses.

Leadership and Engagement

Executive Vice Chancellor and Provost (EVCP) Claude Steele is leading this effort, with Vice Provost for Strategic Academic and Facilities Planning Andrew Szeri and Associate Vice Chancellor-Chief Financial Officer Rosemarie Rae serving as the implementation leads.

EVCP Steele has overseen the design and establishment of a structure that will provide for engagement and consultation with faculty, staff, students, and alumni, as well as effective leadership of and coordination between the various initiatives. An Advisory Council, to be co-led by Academic Senate Chair Ben Hermalin and Andrew Szeri will provide guidance and input. Final decisions will rest with the Chancellor and a body convened for this express purpose. To support the design and implementation of the individual initiatives, we are also establishing an Office of Strategic Initiatives, which will provide analytical support and coordination to the working teams and leaders of the various initiatives.

We realize that many of you will want to know more, and have many good ideas to offer for our consideration. In the months ahead, we will be engaging with faculty, staff and students in order to share more detailed information, answer questions and solicit suggestions.You will also hear more from the leadership of your school, college, or administrative unit as work on the initiatives broadens and deepens across the campus. We have already briefed and will continue to engage with the leadership of both the ASUC and the Graduate Assembly, as well as Chancellor’s Staff Advisory Committee and the Berkeley Staff Assembly, to ensure that staff and student perspectives, ideas and concerns are well represented and incorporated throughout the planning and implementation process.

The phased implementation of changes and new policies will commence in summer 2016. While we will take some steps quickly, others, such as any significant academic and administrative realignment, will take longer.  To learn more and read regular updates, please visit osi.berkeley.edu.

The Future of Public Higher Education

This endeavor must not be interpreted as an abandonment of our commitment to a public mission nor to our efforts to advocate for increased public funding for higher education.  We are fighting to maintain our excellence against those who might equate “public” with mediocrity, against those who have lost faith in the need for higher education to serve as an engine of social mobility, and against those who no longer believe that university-based inquiry and research have the power to shape our society and economy for the better.  What we are engaged in here is a fundamental defense of the concept of the public university, a concept that we must reinvent in order to preserve.

Berkeley draws strength from its faculty, staff, and students that are second to none – doing excellent and innovative work in research, teaching, and public service.  We rely on a tradition of shared governance with the faculty that will be the basis for the decisions we make and the changes we implement in the months and years ahead.  Even now, we plan to do what we have always done at Berkeley: lead the way, and continue to serve as a beacon for the state, the nation, and the world. 

Fiat Lux.

Nicholas Dirks


Chancellor

As you may have noticed, recently university governing boards have been appointing Presidents and Chancellors under conditions of increasing secrecy and without wide consultation with faculty.  The University of Iowa is a recent case as is the University of North Carolina.  The following is a state from the University of North Carolina Faculty Assembly about the UNC Board of Governors' tendency to refuse to engage in shared governance.--Michael

The Leadership and Policy Statement of the University of North Carolina notes that the institution “operates under an arrangement of shared governance” that “honors the important traditional role of the faculty in the governance of the academy.” (http://www.northcarolina.edu/content/leadership-and-policy )

Regrettably, for the better part of a half decade, the UNC Board of Governors has repeatedly failed to follow its own stated principles of good governance. 

The UNC Faculty Assembly has faithfully advised the Board on best practices regarding admissions, tuition, financial aid, leadership appointment processes, curricular design, research and freedom of inquiry, and processes of peer review, yet the Board has repeatedly refused to acknowledge – let alone discuss – points of counsel they have been offered. Instead, they have frequently promulgated ill-advised policies and practices that have proven detrimental to the best interests of public higher education in this state.

The recent mismanagement of the Executive office of the University, from the firing of Thomas Ross, to the hiring of the new President, is but the most egregious in a long train of problematic governance actions.

The failure of the Board to seek the advice and counsel of the staff and faculty is both shortsighted and troubling. No student attends our campuses to be taught, no funding agency or organization provides grants of research support, and no business, governmental entity, or civic organization has come to our institutions seeking public service expertise, because of the teaching, research and service achievements of the Board of Governors or the President of the University. Yet the Board continues to act without the advice and counsel of the constituencies whose expertise they need to effectively govern the institution.

Over the years, the most effective and respected leaders of the University system and its respective campuses have argued that their success is contingent on the support of staff and faculty. We now appear to have entered an era when it is not support, but an ill-informed indifference, that defines how governing authorities in the University think of their relationship to those who carry out the core mission of public higher education. No institution of higher learning has ever achieved excellence and distinction without an active, engaged, and committed community of staff and faculty. It is then incumbent on the Board of Governors to now begin – as it always should have been -- cultivating effective shared governance if the University is to continue on the path of excellence and achievement.

The faculty will not prejudge the commitment of new President to the well-being of the University. But he or she must understand that the secretive character of this search, and his or her own indifference to consulting with staff and faculty when s/he was an active candidate for the position, will make it difficult to win the confidence and trust of the University community.

As this leadership transition unfolds, foremost among those confidence building principles must be a steadfast and unyielding dedication to seeking the best advice and counsel possible, and a readiness to stand against the debasement of institutional governance that has brought the future of the University into doubt.

22 October 2015

For the UNC system Faculty Assembly
Stephen T. Leonard, UNC-Chapel Hill, Chair

Gabriel Lugo, UNC-Wilmington, Chair-Elect

UPDATES:

Story comes to the surface about University of North Carolina's plan to hold emergency meeting to talk with president finalist Margaret Spellings (10/15).  This meeting is scheduled for Friday, 10/16, seemingly in an effort to bypass a bill not yet signed, which "requires the search committee to bring forward three candidates to the full board for discussion."

Amidst a call for John Fennebresque’s resignation (10/16) we see positive and negative discussion regarding What a Margaret Spellings Presidency Might Mean for North Carolina (10/16), with critiques on her political involvement (10/20) and her past actions combating LGBT equality (10/21).

Faculty continue to criticize UNC president search process (10/21), noting that '"The failure of the Board to seek the advice and counsel of the staff and faculty is both shortsighted and troubling.'  Concern over this lack of shared governance is widespread (10/22), as is the realization that Spellings is surely in (10/22).

Compiled by Alysse Rathburn

As you have probably seen, the Governor and the Legislative Leadership have agreed on a final budget bill.  From a funding standpoint, there is little in the new bill regarding UC to change Chris's critical analysis of the Governor's May Revision.  UC is scheduled to receive up to $25M beyond the Governor's original call for a 4 percent general fund increase on condition of a continued tuition freeze.  CSU fared somewhat better.  It will receive approximately $50M over the Governor's May proposal.  It too, though, has a variety of conditions placed on the money.  For UC the key pages of the bill are 105-113 and for CSU 113-117.  I'm going to focus on UC in this post because I am less familiar with the implications for CSU. But I hope that people at CSU will use the comments section to expand the discussion.

There are several key points to make about the total budget package.

First, it includes a one-time payment of $96 million for the UC pension.  But this money is dependent on a dramatic reduction in the benefits of UC's defined benefit pension plan (as was clear from the Regents agreement with the Governor).  After a new system is put into place, the maximum salary that can be counted in a pension calculation for new hires will be approximately $117,000.  The Regents have proposed a supplemental Defined Contribution Plan and have also floated the possibility of allowing new hires to go entirely into a DCP.  If the latter should happen it is possible that the DBP will become unsustainable in any form.

Second, the Legislature was able to get the Governor to agree to an additional $25M above his May proposals.  But this money is contingent on the University enrolling an additional 5000 resident students by the 2016-2017 academic year (107).  There are a couple of things to be said about this situation.  First, as Dan Mitchell pointed out, UC is unlikely to increase numbers in a dramatic fashion for the upcoming year.  That means that these increased numbers will hit with great impact in 2016-2017.  Having been at UCLA when it attempted a dramatic increase in numbers I can say that without proper preparation and expanded faculty and student services the effects are quite serious. Secondly, the Legislature is assuming $5000 of the marginal cost of each new resident student.  This figure is even lower than the LAO calculation that, as I pointed out in an earlier post, would lead to the permanent under-funding of the University. In addition, the money will arrive long after the students have both enrolled and had their presence documented by UCOP.

Sacramento is also insisting that this money, itself inadequate for the simple increase without a lot of supplement, also be used to increase and quicken graduation rates.  Now increasing graduation rates is something that we can all support--but Sacramento appears to be concerned with increasing graduation rates no matter the effect on education.  It wants more students to pass through more quickly with inadequate support--a position that ties in nicely with the Governor's vision that costs can be driven down by pushing students into online courses or reducing requirements.  There is, in all of this, a general disregard for academic expertise and an apparent conviction that quantity is the most important variable.

Although less explicit, it seems as if the Legislature and the Governor are willing to make the University more dependent on non-resident students even as they insist on increasing the number of resident students.  Although the Legislature and the Governor have insisted on a continuation of the tuition freeze for resident students through the 2016-2017 academic years (106), President Napolitano has been empowered to increase tuition for non-resident students up to 8% annually.  Both the Governor and the Legislature have apparently agreed to the assumption that non-resident students can be used to underwrite resident students so that the State can continue its long-standing failure to support higher education in the state.

Thirdly, and more positively, the Budget Bill demands greater administrative and spending transparency (108-109).  The bill directs the University to finally clarify the nature and distribution of the Manager and Senior Professional category (long one of the black holes of administrative transparency), to clarify the financial sources it considers applicable to educational activities, and to provide forecasts of costs and resources through 2018-2019. Although this transparency will not accomplish anything in and of itself, it will allow for a more open discussion of priorities than has been possible in the past.  The bill also demands that the University include state employee salaries in any market calculation for the Senior Management Group.  In effect, Sacramento is challenging the University's insistence that its administrators should be paid more than other public executives. Given the University's recent practice of hiring administrators without prior background as educators it is perhaps not surprising that the Governor and Legislature are now wondering why they should be treated differently than other public administrators.

                                                                               *****

At this point in time, it is difficult to see how President Napolitano and the Regents efforts to provoke public support for the University were successful.  Nor is it clear that the continued willingness of the University to act as if the Governor is the only player in town makes any sense.  In the end, the University received approximately 25-30M extra dollars compared to what the Governor had promised in previous budgets.  But this additional money comes with some very crucial strings, including a drastic reduction of pension eligibility, agreements to look into reducing graduation requirements, increased auditing of faculty and staff, increased dependence on NRT, and the possibility of even greater state intrusion into university affairs. It is also true that President Napolitano was able to get the Governor to promise a longer-term funding commitment to the University.  But as we learned from Schwarzenegger's "compact," those promises are easy to make and easy to break.  So, the bottom line seems to be minimal increased funding, seriously increased auditing of academic life, continued pressure to sacrifice educational quality to cost cutting, and a commitment to substantial cutbacks in retirement benefits for future employees.  Not a good budget round.

I'm sorry to rain on the parade, but even though the state continues to recover, UC does not.

In November 2014, Gov. Brown offered UC a 4 percent increase in state funding, or $119.5 million.  The UC Regents countered with their famous 5 percent tuition increase, which would have added another $131 million (not counting financial aid revenue from the state).  That might sound like a lot of new revenue, but it isn't. Were both pieces in place, UC would be getting about half of the16 percent annual increase it had estimated it needs for several years running to recover from the Schwarzenegger and the Brown cuts. See my November post on the Regents meeting for context and for UCOP's chart on the subject.

There are various ways to describe the problem: it   is a $1.5 billion structural deficit (2011 values) or it is the $1 billion in cuts since 2008 that CFO Brostrom uses in public statements. A third way is even more ominous: the last Independent Audit Report of UC's finances had UC losing $5.7 billion on operations in FY2013 and $4.5 billion in FY2014 (page 10).  These losses were partially offset by non operating gains (investment returns is the largest piece). Even so, the shortfall was $1.0 billion in 2014.

The Governor has again offered UC the same state increase and no more. He has added a compact-like agreement to do this for four years in a row.  At the appearance of a new headwind he can abandon this commitment as Gov. Schwarzenegger abandoned his, but more to the point is that this is a minimal increase that would likely have emerged from the normal budgeting process.  UC has agreed to freeze tuition for another 2 years, so that increment is lost. In 2017-18, UC can request a tuition increase, but one to be tied to an inflation rate that is likely to remain well under the 5 percent UC proposed. 

In other words, UCOP has agreed to several more years of austerity and shortfalls.  This will keep the deficit in place and, as far as I can tell, sustain annual operating losses.  

Students will be happy they will not be paying more. They will not be happy that they will still be getting less.  Educational quality became a clear student issue last fall. But the state's likely political calculation is that cost is still more important than quality, and that students will also take deal.

One possible compensation for bad operating budgets would be a structural fix.   Here we arrive at the pension announcement.  This Democratic administration has taken to describing UC's pension liability as both a gap to be filled and an affront to state budgeting.  It is not just a budgetary problem in this narrative but a moral failing on UC's part. UCOP wanted the state to start paying the employer's share of the pension as it had in the past, and as it does for Cal State. The state's refusal to do this was one reason why the restart of the contributions was delayed. 

The state continues to refuse annual contributions. What it has now offered instead is a one-time payment of $436 million staggered over three years. In exchange, UC is to tier its pension again by adding a Defined Contribution plan for new employees and capping the Defined Benefit pension at the state employee level of $117, 020. (See Dan Mitchell's rundown here.)

In budget negotiations, it is always a bad idea to make a permanent change in exchange for a one-time payment, and this one is no exception.  In addition, the amount received is very small: $145.33 million per year for three years, while UCRP, the pension fund, has a $73 billion net position for pension payments, which is up nearly $10 billion from the previous year, and paid out nearly $4 billion in benefits last year  (page 17).  Why would you restructure your pension, which your employees dearly love, in exchange for 3.6 percent of your annual pension expense, and for just three years?  

UCOP has already handed UC employees an 8 percent pay cut in the form of restarted contributions, and UC operating funds have been squeezed to do the same--with very good results for pension solvency.  So what is the real purpose here?  Perhaps the purpose is to convert UC's pension into a 403(b) over time, and that UCOP wants this as well. I don't know this, but I can't explain why UCOP would take this deal when the pension is actually on the mend.

I can see why the state would do it. It gets a chunk of UC operating expenses off its budget. State politicians can also divide up the UC employee body.  The Academic Senate already cooperated in one tiering of the current pension for ladder faculty; most unionized employees voted to keep younger employees with them in one tier while paying an additional percent of their income to help the fund.  Represented staff generally make less than the $117k pension limit, will thus be less affected by the cap, and have resented high executive salaries.  Thus the state may face little UC employee opposition overall.  

Ladder faculty, senior managers, and Management and Senior Professionals will be seriously affected. The cap would make faculty retention harder: in most disciplines, the cap will kick in at mid-career when the most visible faculty are most liable to be recruited away, and a capped pension will make it that much easier for competitors to beat UC's best offer.   (In some disciplines, assistant professors will start at or above the cap.) UC campuses have long been starved for internal funding for non-sponsored research, academic programming, and new teaching initiatives, but have been able to offer retirement security in the age of academic adjuncting and the "disposable employee."  As retirement benefits are cut and/or destabilized, faculty will lose the one clearly superior thing about working at UC.   

Jerry Brown has long been inserting himself into the middle of UC educational policy, most obviously with his campaign to convert some percentage of UC courses to online. This current deal sets the first actual quota for new students: one third of them must be transfer students from community colleges.  Listen to the clips of the governor and his budget director that Prof. Mitchell has posted.  They offer a good representation of executive branch aggressiveness, and also feature Gov. Brown saying that he wants UC's lower division to shrink.  

This idea is equally bad for students and for the University.  Resident undergraduates who actually want to go to a four-year university will be squeezed between non-resident applications who pay 3 times more and community college students who have seats set aside for them.  In addition, they will lose the lower division courses that form part of the integrated curriculum for the major they will eventually complete.  Putting the first half of college into some other institution's hands will make coherent sequencing and skills accumulation that much harder.  On their side, campuses have a budgetary ecosystem that a shrunken lower division will damage.  Lower division enrollments cross-subsidize graduate education, sponsored research, and student services, among other things, and provide graduates with teaching opportunities.  Shrinking lower division enrollments will shrink funds that support UC's status as a research university.

We'll have more to say about all this during the Regents meet next week and as the plan unfolds. But my main impression today is that this is another step in the state's half-unconscious plan called, "the UC reversion to the mean."  UC was for decades a spectacular, standout place.   It now seems slated to follow California's K-12 system down the national rankings--or would do were other states not busily pushing the rankings collectively down by slashing their university systems too.  

The higher community needs to say, if our senior managers will not, that all of these budget economies are false. Saving money as Sacramento would like simply reduces the quality and the quantity of the intellectual and human capital that UC can produce.  The economist Walter McMahon offers the most comprehensive quantification that includes the non-market and social benefits of higher ed. He shows they are together twice as large as the private, market benefits.  And yet the state, led by Jerry Brown, is trying to fund UC only for the latter, in which it is a three-year skills training service that starves both higher order capabilities and research. If this carries on, massive public benefits will be lost. 

In addition, the quantitatively larger portion of the benefits of higher education, these indirect and non market benefits, consist of deep, complex capabilities like powers of critical thinking and a capacity for democratic deliberation.  These are often generated by liberal arts and sciences disciplines that form the campus core. They depend almost entirely on state funds and tuition.  UC is now starving the core but sustaining the periphery, particularly the medical centers where so much of the administrative growth, pension liability, and high-end salaries have accrued.  One good feature of UC having lost two of its national laboratories to a private limited-liability corporation during the Bush years was that the federal government reimburses UC for pension costs at Lawrence Livermore and Los Alamos National Laboratories.  It may be time for a similar spin-off of the medical centers.  

I think that would be too bad, personally--medical research and practice are obviously crucial academic and public services.  Unfortunately, this latest poverty deal makes the internal competition for dwindling resources even worse, and the campus core is not protected.

Photo credit: Onbeyond, LLC, 2003.  Sample public campaign ad for UC, declined by UCOP

The big story in Higher Education this year has been the threat of massive budget cuts.  From Wisconsin to Louisiana, from Kansas to Arizona, and from Maine to North Carolina, state governors and legislators have proposed or enacted cuts to public colleges and universities. Although the outcome of this year's budget struggles remain uncertain, it does seem clear that California is not going to impose new cuts. Instead we seem to be battling over the size of small state funding increases.

That contrast between California and other states might appear to be grounds for confidence in the future.  But that would be premature.  Although the state has increased funding over the last several years and is proposing a small increment this year--it is important to recognize not only that these increases do not compensate for the years of cutbacks but that they help to solidify a strategy of permanent austerity budgeting.

One way to see this point is to look at the recent Legislative Analyst's report on "enrollment funding" for UC.  The main point of the report is to call for the Governor and Legislature to reinstate "enrollment funding" (i.e. to tie state funding to specific enrollment targets for the University).  Now I should say that I have no problem with the idea of enrollment funding.  Both the Governor and UC have done away with it (the Governor I suspect because he doesn't want to be obligated to increase funding with enrollment and UCOP because it allows them greater flexibility should they want to restrict enrollment without losing state funds).

If made correctly, there are good arguments for a greater linkage to tie funding to enrollment and to ensure that funding goes to support that enrollment (for instance ensuring that a new permanent faculty FTE is hired for every 19 additional students as is assumed in the financial calculations). (4) But the way that the LAO seeks to organize enrollment funding is less defensible and also revealing.

The logic of enrollment funding ties increase state support to the marginal costs of additional students.  The LAO calculates the marginal cost at $9244 for general campus students (UC's is slightly higher but I am going to use the LAO's). (8)  The LAO recommends setting the present year as the baseline for enrollment--which would also lock in the per student funding as it now exists as a baseline.

They propose that present enrollment be considered the baseline because it would avoid a conflict over whether funding should go for increased enrollment or to answer UC's claim that there are significant numbers of unfunded students.  But here is where the problem lies. Instead of providing a way to address the conflict over whether or not the state is fully funding students, the LAO simply eliminates the question by refusing to engage with it.  And that has serious implications.

The easiest way to do see these implications is to accept the LAO cost logic and then look backwards over the last decade and one half.  To be sure this means that all of what follows are estimates--but I think that the general picture is clear.

In 2001-2002 UC received $3,279,000,000 from the General Fund.  In the fall of 2001 there were 167,914 resident students enrolled on the general campuses.  In the fall of 2013 (the last year that I have good numbers for) there were 196,917 resident students enrolled on the general campuses.  That increase of 29,742  should have led--given the LAO's calculations of marginal costs to a funding increase of approximately $275M from the state (and this is without additional costs for health system students).  Put another way, the 2013-2014 UC General Fund support would have been $3,560,000,000. Instead it was $2,884,456,000.   The Governor's proposed General Fund contribution for 2015-2016 is $3,106,138.

The numbers, although approximate, are clear.  The LAO's proposal on enrollment funding would lock UC into a permanent structure of state austerity.  Although the state does pick up some of these losses through Cal Grants they do not recover all--nor do they even begin to backfill the long-standing under-funding of the University.  Students, staff, and faculty have been forced to assume the costs of this austerity--whether in terms of higher tuition, larger classes, or increased workloads.  By all means have the state engage in enrollment funding. But also have the state fund that enrollment at an adequate level, and allow it to rise as costs and educational needs change.

Rose Aguilar had a segment of her show "Your Call" on KALW that focused on the UC Budget and the need for transparency. UCOP apparently decided was not to send someone to talk on public radio in San Francisco. But luckily Chris participated along with Dan Walters of the Sacramento Bee and Kevin Sabo of UCSA.

You can find the episode HERE

by Wendy Brown, Political Science, UC Berkeley

3rd of 5 talks from The Operation of the Machine panel, UC Berkeley October 1, introduced by Prof. Colleen Lye

I want to make two brief points this afternoon, one about freedom and one about speech. 

If forced to compress into a few sentences the contours of student freedom and its limits in public universities 50 years ago and now, those sentences might go this way:

Then:  Because developing the next generation of Californians as educated individuals, citizens and contributing members of society was widely valued as a public good, the university offered a free, high quality education to qualifying (mostly white) middle class and working class students.  Faculty (also mostly white and male) had significant power over large domains of university policy-- they determined what was to be learned and how, what counted as an educated person worthy of a degree, and much more.  But the university administration not only prohibited student political expression, it codified a panoply of restrictions as it sought to be a zone clear of politics, unmarried sex, illegal substances and, implicitly, non-whites.  Thus “the gears of the machine”—from racial exclusion to speech restrictions—were tangible controls that cast students as rightless children being prepared for educated participation in society, economy and politics.

That was Then.  And Now?  UC doors are open to anyone with the wherewithal, parental pressure or supplemental support structures to deliver the test scores, grades, and profile to compete for admission (or who have singular athletic ability, or are well-off non-residents). No longer a public good or publicly supported, UC is construed as a place to invest in oneself as human capital, and according to a set of calculations about what will appreciate or diminish this capital.  Courses are increasingly on offer like Walmart goods, and respond heavily to consumer demand.  And faculty power has receded to a few small corners of the plantation—students feel it most in the form of access to classes and grades.  In the domain of student political, social and sexual expression, just about anything is permitted.  

However, the burden is on each of you to invest your time and effort strategically, not only to gain high return on your expensive investment but to develop the little speck of human capital that is you and that is yours alone to develop.  

This burden is so great and so impossible to put down for anything —an alluring music class or other exciting course outside your major, let alone a political cause, or dwelling for uncounted hours with an idea, a question, a compelling bit of text. Thus, if there are few repressive rules or overt restrictions on what you can do or say, the conversion of the university from a public good to a private investment made by you and your family radically changes the coordinates of unfreedom faced by students today.  How much can you afford to think, learn, want or do that does not comport with enhancing your future value to employers, grad or professional schools?  What freedom to speak, protest or organize against injustice can you exercise that would not be suicidal for the human capital you are enjoined to develop here, into which you have invested family life savings or taken on debt, and which has become the supervening if not sole purpose of a university education? 
Thus, today, the gears of the machine don’t clang and grind out there:  they are are soft, quiet, and deep inside us.  And throwing our bodies on them in resistance requires a complex contortion and commitment.

Ok, that was freedom.  Now speech, where I will also mark just one of many major differences between then and now, or between what we might call the repressive liberal era and the putatively emancipated neoliberal era.  This one pertains to the ways that the neoliberal assault on public things—a public sphere, public goods, public life--has led both university administrators and would-be activists into a certain confusion about free speech as a distinctly political right, one born from political struggle and secured historically for political life.  We have seen a bit of this confusion in recent months when “civility” or “respectful listening” have been mistakenly declared an inherent entailment of free speech or academic freedom. Certainly civility and respectful listening may be expected at a dinner table, a university classroom or a department meeting—it would be good if they prevailed more routinely.  But they have nothing to do with the exercise of free speech in public, where (barring threats, harassment, or dangerous incitements), anyone may say anything…and no one must listen or listen well. 

A far more treacherous instance of contemporary confusion about our political rights comes from the Supreme Court in recent years.  From Citizens United to Hobby Lobby, the Court majority has been busily granting political freedoms—of speech, of religious belief-- to corporations who may now use their enormous wealth and power to overwhelm the last standing icon of democracy, elections, and withhold medical insurance for Constitutionally guaranteed reproductive rights.

This confusion, from high places, of whom and what our political rights are for, and what they do and don’t entail, would take hours to analyze properly.  But I want to consider one especially troubling version of it on college campuses today, one that we can do something about.  This is the effort to regulate public speech to protect certain vulnerable groups from offense, hatred, being retraumatized.  

This protection racket begin, alas, a couple of decades ago with well-intentioned feminist and anti-racist efforts to outlaw hateful or offensive speech and images.  But this tool, which aimed to shield the historically hated or subordinated from being hit again in the present, has not remained in the hands of the Left.  Indeed, while it’s animating the contemporary “trigger warning” madness (a discussion for another day) it has also become one of the more potent instruments of illiberal American ultra-Zionism today.  It is what dignifies the fallacious argument that publicly criticizing Israel on campus creates an unsafe or offensive climate for Jewish students.  

So what begin as a concern with subordinating or hateful speech has been appropriated to silence protest against power.  Of course any political argument can be flipped—Californians know this best from the legislation that ended affirmative action, which, you’ll recall, was called The Civil Rights Initiative.  But there’s something more troubling here, which is the confusion of the public sphere with therapeutic spaces or homes.  The domain of free public speech is not one of emotional safety or reassurance, and what you might hear in Sproul Plaza or up at this podium might be disturbing, uncomfortable, enraging, even offensive.  

Public speech is one of the most powerful weapons ordinary human beings have, and even the most civilly uttered sentences can disturb or terrify.  Certainly the speeches of Sojourner Truth, Frederick Douglass, Martin Luther King Jr., or Malcolm X made neither white people nor many blacks feel safe.  Certainly the revolutionary slogan, “liberty, equality, fraternity” did not reassure either the French aristocracy or its minions in mid-18th century Paris.  Do you think Wall St Bankers felt safe when they walked past thousands of Occupy protestors decrying the obscene wealth, destruction of democracy, and carnage of public goods for which they were being held responsible?  Do you think closeted homosexuals felt safe when the Stonewall rebellion broke out? Do you think men who have pushed, drunk or drugged women into unwanted sex feel safe as women on campuses everywhere are finally speaking out against the commonplace of sexual assault?  Or that civil servants, police and other hired guns of regimes across the Middle East felt safe when citizens amassed in public squares to denounce them during the Arab spring?  Emotional safety is not what the public sphere and political speech promise.  It’s for cultivating at home if you are lucky enough to have one.  It is what you seek among friends and intimates where you expect your vulnerability to be taken into account. 

A university education, too, ought to call you to think, question, doubt.   It ought to incite you to question everything you assume, think you know or care about, not because those assumptions or cares will be jettisoned.  Rather, because, as those wild-eyed radicals Immanuel Kant and John Stuart Mill insisted, there is no possibility of knowing what’s right, justified, valuable or true unless you question deeply and relentlessly…unless you’re willing to consider whether your attachment to an idea or principle is really just a teddy bear you cling to, a comforting familiar.  The public sphere and a university classroom are not for hanging onto your teddy bears.  Your bears have their place, back in your room where you’re safe and restored.   But when we demand—from the Right OR the Left-- that universities be cleansed of what is disturbing, upsetting, enraging, “offensive” or triggering, we are complicit both with the neoliberal destruction of university as a place of being undone, transformed, awakened (rather than a place to get job training) AND with neoliberalism’s destruction of public spaces and the distinctive meaning of political rights, (rights that some in this room fought to bring onto campus 50 years ago).  

Let’s demand something far more important, which is to be provoked and challenged, every day and down to our very toes in what remains of this extraordinary institution.  Let’s have the courage to stand for that, and to be willing to withstand it.  

By Jennifer Ruth (Portland State University)

The conversation prompted by Excellent Sheep has turned into a referendum on “meritocracy.” Deresiewicz mercilessly takes meritocracy to task – “The meritocracy purports, like every ruling class, to act for the good of all,” he writes; “Its ethos is in fact, by definition, one of self-advancement: not duty or responsibility, not character or even leadership, but individual aggrandizement, a single-minded focus on the self and its success” (226). For Deresiewicz, meritocracy is the culprit behind the Reagan-era culture of “winner take all” that continues on today among our elites who are “brilliant, gifted, energetic, yes, but also anxious, greedy, bland, and risk-averse, with no courage and no vision ” (228-9). These political and business elites can’t wrap their heads around why they keep falling on their faces when they are so manifestly intelligent. Here’s Deresiewicz on Obama: “With his racial identity and relatively humble background, his election has been called the triumph of the meritocracy. The sad thing is that that's exactly what it was” (230). Obama is a failure because “he plays it safe, like every other product of the [meritocratic] system” (229).

Meritocracy’s defenders also do it no favors. Steven Pinker’s rebuttal to Deresiewicz’s New Republic piece “Don’t Send Your Kid to the Ivy League” starts off with a reasonable-sounding defense of the ethos of meritocracy as the prioritizing of ability and effort over various forms of inheritable privilege. By its end, however, Pinker’s piece has become a party in honor of standardized tests. Pinker believes that merit—defined as intelligence—can be measured objectively. The problem for him then is not that colleges follow a meritocratic admissions process but that, with their legacies and athletes and trombone players, their process is not nearly meritocratic enough.

Pinker doesn’t worry about wealth buying merit because he thinks it can’t. All those advantages the well-off give their children—from piano lessons to the best private schools to test-prep courses? They only budge their kids’ scores by a negligibly few percentage points, Pinker tells us. Ensconced at Harvard and annoyed that students prefer competing in lacrosse games to attending class, Pinker doesn’t seem to grasp the main issue. Isn’t the issue that entrenched inequality has destroyed any illusion that rewards are distributed meritocratically in American society? And, further, that if meritocracy did once act as a vehicle of redistribution, it acts to exacerbate inequality now?

Chris Hayes hammers this point home in The Twilight of the Elites: America after Meritocracy (2012). Hayes discusses the structural tension between equality of opportunity and equality of outcome. He argues that the generation that profited when we moved from an old boy patronage system to a meritocracy (or equality of opportunity) has pulled the ladder up behind them. Though the meritocratic culture once lead to greater equality of outcomes, in its second and third generations it has led to greater inequality of outcomes.

Each ruling class, it seems to me, is always in danger of devolving into a patronage system regardless of the nature of its original legitimation. The middle class Barbara Ehrenreich discussed in her 1989 classic Fear of Falling has been hollowed out but her analysis of a certain psychology applies to today’s elite. They do not want their children to have to experience a lower standard of living than they enjoy. The impulse to rationalize advantages and even game the system when people you care about are involved is irresistible for many. The fight against this—what Deresiewicz refers to as “self-overcoming”—is never-ending.

It’s not just parents with kids. I see it at the departmental level. People from relatively modest backgrounds who got into Stanford and Harvard and are now Professors of English or Cultural studies will push hard to hire friends or family. They not only don’t see a problem with this but they see themselves as doing something compassionate by championing the people they know over the people who are as yet words on a page. The ever-flawed striving for some modicum of objectivity—the holding at bay of connections and kinship—doesn’t come easily to any of us, no matter our personal trajectories. If we desire a fair society, though, we are doomed to repeatedly breaking up patronage systems—even patronage systems generated by meritocracies.

Hayes argues, however, that at this point simply breaking up patronage systems is not enough. We can only restore the equality of opportunity from which today’s elite benefitted by moving decisively in the direction of equality of outcome. This begins with redistributing wealth back to public education because, whatever it might be, a meritocratic society is certainly not one with such extreme and stubborn inequality that the vast majority of its 18 to 24 year olds are deprived opportunities for quality education, gratifying work, and socio-economic mobility.

Deresiewicz ultimately arrives at a similar conclusion:

If service workers can demand a $15 minimum wage, more than double the federal level, then those who care about higher education can insist on the elimination of tuition and fees at state institutions and their replacement by public funding furnished by taxes on the upper 10 percent. As with the minimum wage, the campaign can be conducted state by state, and it can and should involve a large coalition of interested groups: students, parents, and instructors, to start with. Total enrollment at American colleges and universities now stands at 20 million, on top of another million-plus on the faculty. That’s a formidable voting bloc, should it learn to exercise its power. Since the Occupy movement in 2011, it’s clear that the fight to reverse the tide of growing inequality has been joined. It’s time we joined it.

These words are from Deresiewicz’s essay “The Miseducation of America” in the Chronicle of Higher Education. The last pages of Excellent Sheep strike the same power-to-the-people note and, while I’m grateful that he concludes on such a note, it’s hard to avoid the feeling that he tacked on these pages after someone read the manuscript and asked: Okay, but what do you have to say about the nation’s students who really need help?

Deresiewicz justifies the attention he lavishes on the Ivy League cohort by pointing out that they become the elites who have outsized power over the fates of the rest of us. Fair enough. But until we restore funding to our public universities, it will be hard to resist the siren song of select schools. “The economist Caroline Hoxby has shown,” Pinker writes, “that selective universities spend twenty times more on student instruction, support, and facilities than less selective ones, while their students pay for a much smaller fraction of it, thanks to gifts to the college.” Betsy Hammond, The Oregonian’s higher education reporter, recently published a piece entitled “Are Oregon Universities Efficient at Producing Graduates?” Relaying the information provided in the

the study "Trends in College Spending: 2001-2011" by the American Institutes of Research, Hammond reports that my institution, Portland State, “remains one of the most efficient public research universities in the nation, spending just $40,700 on education and related expenses for every graduate it produces.” Hammond’s use of the word “efficiency” has the bizarre effect of implying that the less a public university spends on its students, the more praise it deserves. The fact that state funding for Portland State University decreased by 80% over the last two decades surely is a tragedy, not a case study in virtuous efficiency.

Is the problem the concept of meritocracy—a concept, after all, that demands that every effort be made to even the playing field before the games begin? Isn’t the problem that we’re no longer bothering to level the field by even so much as an inch?

Deresiewicz tells us that Ivy League students don’t hang out on the beautifully manicured campus lawns or brood over Rilke, because they have been trained to avoid activities that don’t further their careers. As the numbers above demonstrate, Portland State students do not have the same fertile environment to squander. Even if they did, most of them wouldn’t be able to take advantage of it since the vast majority of them work outside school. Many of them hold 30 to 40 hour a week jobs. They take these jobs to pay for their classes and yet the punishing work schedules turn their classes into just more obstacles on their weekly obstacle course.

Deresiewicz’s weakness for grand flourishes simplifies what’s at stake: “We’ve had meritocracy; it’s time for democracy,” he says as if we all know and agree upon what both “meritocracy” and “democracy” mean. But Deresiewicz is right about what he calls “the essential thing.” “The new dispensation must ensure--this is the essential thing—that privilege cannot be handed down;” he tells us; “The education system has to act to mitigate the class system, as it did in the middle decades of the twentieth century, not reproduce it.” If we want a society that plays more people than it benches, we have to win that campaign Deresiewicz talks about—the one to eliminate tuition and fees at state institutions and replace them by public funding derived from taxes on the upper 10 percent. Where and when is the campaign kick-off party?

This post focuses on the University of California's budget situation, but it is broadly applicable to public colleges and universities across the country.   More evidence of the national pattern came in this week, with reports of Moody's negative outlook on higher education's finances.  The Chronicle of Higher Education's Don Troop provided highlights of Moody's view of the overall sector.  UC reflects the convergence of all but the fourth of these trends.

1. Growth in tuition revenue remains stifled by affordability concerns, legislative ceilings on tuition levels, and steep competition for students.
2. State financing of higher education will increase, on average, just 3 to 4 percent—not enough to meet the growth in expenses.
3. Already stiff competition for sponsored-research dollars is getting stiffer, with success rates for proposals dropping from 19 percent in 2008 to below 15 percent last year.
4. One in 10 public and private colleges is suffering “acute financial distress” because of falling revenues and weak operating performance.
5. Public colleges will begin to feel the impact of underfunded pensions and health benefits for retirees.
6. Most public colleges and many private ones will be unable to achieve a 3-percent annual growth rate in operating revenue, Moody’s benchmark for sustainable financing at a time of low inflation.

Moody's also slapped UC with a minor downgrade, from the second-best rating to the third.

1. Did Tuition Hikes Make Up for State Funding Cuts?

As the UC Regents discussed the budget this week, the headline figure for California higher ed is the five percent public funding increase over last year. This has convinced most people that UC and CSU are getting a good deal from the state.  I've heard the same from some faculty, who tell me that UC is on the mend, and that we should stick to our work and let the economy recover.  Sadly, I don't see this mending in the Regents' budget documents.  What I do see is a hardening of the downward definition of public higher education through budgetary means, with no public debate.

The overall state picture is the same today as it was in November, when I wrote an overview entitled "The Old State Funding Model is Dead."  It is still dead, and if you are rusty on our current budgetary framework, you might want to (re)read that summary of the state government's perspective on UC and glance at the chart of the past fifteen years of budget trends. 

In the coming year, UC will receive around $2.8 billion in general fund (GF) receipts, which is about $2.2 billion below where it would have been had its budget grown in step with state personal income after 2000-01 (I use UCOP figures here, page S-4).  That GF total now includes debt payments on UC's General Obligation (GO) bonds, which the state had formerly paid on its own, so operational GF receipts are more like $2.6 billion. This is exactly where GF funding was ten years ago--not counting for inflation or enrollment growth, which Jerry Brown has decided the state will no longer fund.  Proposed future state increases are too small to move the University much off this bottom.  

The state has convinced itself that UC has made up for state funding cuts with huge tuition increases.  But as big as they are, they haven't replaced the cuts.  UC grossed $727 million in tuition in 2001-02 (Table 1, or about $1 billion in current dollars) and about $3.2 billion this year (same table), for a gain of nearly $2.2 billion in today's dollars, which seems at first to make up exactly for the GF cuts since 2000-01.  

But the net tuition gain is under $1.5 billion after financial aid is taken out, so we now have a net loss of $700 million.   Throw in enrollment growth of 55,000 students, which is the same as having added two additional UCSB campuses (and not just one hamstrung UC Merced).  UCOP continues to claim that they spend $19,590 per student, but let's say they only spend a third of that: we've just added $330,000,000 in additional operating costs and pushed the net loss in the GF-tuition swap to well over $1 billion per year.   In other words, tuition increases have only made up for something like half of the state cuts.  UCOP's claim, with somewhat different assumptions, that tuition increases have made up for about one third of the state funding cuts, is also plausible.  

Public universities, in short, did not have a "tuition option" for solvency even when they could raise tuition a lot--which they no longer can.

2. Austerity and Institutional Debt

The current public university path, if UC is an example, is a perverse combination of austerity and structural deficit. It is perverse because the only good thing ever alleged about austerity is that it pays down deficits, whereas this kind of public university austerity will not.  Perverse austerity is conventional wisdom in many lands, as Paul Krugman has tirelessly pointed out.  In Austerity: the History of a Dangerous Idea, Mark Blyth argued that austerity isn't about fixing its target institutions--like public colleges--but about hurting those institutions in order to help others--like banks.  UC austerity is about hurting UC -- or, more precisely, about defining it downward in part to lessen its budget claims.  

I'm making this point because another dangerous idea is for faculty, staff and students to sit back and let  projected economic growth fix the university.  It won't.  All Regents budget documents now contain sentences like this: 

Given the funding shortfall, campuses will need to weigh and balance among competing priorities with the understanding that there is not enough increased revenue to fund mandatory cost increases, let alone the other high-priority costs identified in the November budget plan.

The is the equivalent of the older, tactful Surgeon General's warnings about smoking cigarettes: "this budget may be hazardous to campus health."

OK, this is not big news for those of us who've been following this for years.  But there's something poignantly revealing about the documents this month.  The state offers small bits of funding to UC here and there, mostly on a one-time basis, for specific projects, normally known as earmarks.  A particular one-time item, $50 million in supplemental funds based on higher-than-expected property tax receipts, was cancelled by the governor before the Regents had a chance to celebrate it.

Then there's the pension.  UC employee contributions have now risen to 8 percent of salary, and UC's employer share is going to 14 percent of payroll.  UC asked for the state to fund just next year's new increment on the employer contribution to the pension. This would be $64 million to cover the increase from 12 percent to 14 percent in 2014-15.  The state rejected even this fractional contribution.  

The state's point may be that the pension is UC's problem because the UC Regents created it, with their two-decade pension "holiday" in which neither employer nor employee made contributions.  But it's not like the state wants to force accountability by naming names and cleaning house: Gov. Brown recently reappointed several long-term regents who among other things were directly involved in this ongoing lack of basic fiduciary responsibility. I assume that the pension liability helps Sacramento keep the financial dunce cap on UC's head, forcing humility in its budget demands.

A major result of the university's political weakness and the resulting austerity is more institutional borrowing.   A normal sign of an improving economy is that institutions start paying down the debt they accumulated to get through a downturn.  That isn't happening here. UC needs to borrow to make its contribution to fully funding the UC Retirement Program (UCRP) by 2042.  It has been borrowing from its Short Term Interest Pool (STIP) for several years, and now wants to borrow another $700 million next year to make all of last year's (2013-14) planned payment.  Without getting into the weeds of this issue, I'd summarize UCOP as saying it still can't afford to return the pension, by 2042, to 95 percent of the level at which all liabilities are covered, without continuing to borrow. (Two weeds: UCOP is saying it can't afford "modified ARC" for that year on its own; and although the document claims faculty Senate endorsement, this plan appears to be less than the Senate's call for 100 percent liability coverage by 2042).  The pension is set to be significantly underfunded for most of the next thirty years. It will be a permanent political target and a burden UCOP will set against operating funds, with the likelihood of future liabilities incurred to pay down the pension liability.  

The sadder example of ongoing debt is the request for "external financing for the UCPath project." UC Path was UCOP's flagship solution to UC inefficiencies that were allegedly wasting taxpayers' money--in other words, new enterprise software for the systemwide consolidation of payroll and human resources functions.  This is boring, important back office stuff, hardly good material for a political campaign to show the state "UC means business," but that's what it became.  Rather than funding each campus's decades-old effort to upgrade its systems on its own, UCOP sought centralization, which predictably introduced new levels of cost, complexity, and inefficiency, since centralization is often not actually efficient.  

I had heard nothing good about UC Path from people trying to implement it on campuses, and have tried to ignore it, but this week it has resurfaced as a problem at the Regental level.  The project timeline has grown from 48 to 72 months, and its costs are said to be $220 million (it had spent $131 million by May 2014) . Worse, the repayment schedule has mushroomed from seven to twenty years. Annual payments are to be something like $25 million.  Campuses are to be taxed to pay for 2015-era systems until 2035, which is like taking out a twenty year mortgage to pay for your refrigerator, except that your fridge will be working better in 2035 than next year's PeopleSoft product.  Since the concurrent budget document  notes efficiency savings of $30 million per year (top of page 4), UCOP may be spending $220 million to save a net $5 million per year over a couple of decades--and going into debt to do it.  In the end, an efficiency measure has turned into a literal liability.

3.  How to Respond? 

Moving forward, I'm afraid that officials are going to have to get much better at admitting mistakes like UCPath, and then actually undoing them. I couldn't listen to the recording of the UCPath conversation, but Cloudminder made it sound like a lot of restrained finger-pointing with no solution in sight. Did anyone say, "well, this seemed like a good idea at the time, but it's not. Let's just cancel it, figure out where we went wrong, and come up with something better"?

A related issue is getting over the idea that technology will save us.  It won't. Technology is always a sociotechnical system, with people adding tacit knowledge, relationships, and much else that tech really can't replicate or replace.  Universities need de-bureaucratization, not more technologized bureaucracy.  They need organizational redesigns, including large scale simplification and task reduction.  That's where the real savings are, but it's not about pooling, herding, or firing people, but about first fixing the jobs that they're supposed to do.  Of course technology is part of the solution: it just can't decide organizational functions and purposes.

On the plus side, UC officials have gotten good at describing the funding shortage. In a recent op-ed, UC Berkeley's Vice-Chancellor for business and finance, John Wilton, bites the hand that feeds him micro-restorations:

Despite UC Berkeley’s [strong] performance, state funding has been cut more than half in real terms over the past decade. Consequently, “public” funding now accounts for only about 13 percent of our total operating budget. While this year’s state budget reflects a 5 percent increase, this results in a 0.6 percent increase in Berkeley’s total revenue. At this pace, it will take us until 2026 to reach the same level of state funding, in nominal dollars, we received in 2003.

This kind budget memory is helpful.

Second, universities have been testing the message that cuts damage educational quality.  I don't see any other issue that will get the public to care about X percentage of cuts vs. X minus Y percentage of restoration by year Z.  The only meaning the numbers have is students missing the boat to the next society because public universities can't give them cutting-edge knowledge and cognitive skills.   Mark Yudof said as much at a Regents' retreat almost two years ago, where he stated that cuts have meant "a quiet but steady erosion of our academic quality at almost every level.” 

What we don't have but desperately need is a consistent public explanation of the educational quality problem, a clear articulation of the budgetary fix, and a mobilization of university communities, students' families, and the wider community. The time of change by political counternarrative has come and gone.  VC Wilton's ended his piece with a general exhortation: "We are in this together, and time is not on our side. We should all take up this cause now, before it is too late."  True. But were we to take up the cause, what would we actually do?